Reaching Consumers Via Credit Cards: A Real Problem In Brazil

Date: August 1, 2017

Online retailers trying to reach global consumers are often frustrated by the different characteristics of transactions in individual countries, whether large or small. Consider the case of Brazil, a country with the fifth largest population and the ninth largest GDP in the world, according to 2016 statistics from the World Bank.

In the second in a series of interviews, GoInterpay VP of Business Development (and friend of Getting to Global) Matthew Cannon explains that although a relatively high rate of online transactions in Brazil are paid via credit cards, Brazilian consumers are hard to reach for global retailers who haven’t set up local payment solutions. Matt explains why here:

The problem with national cards

Among online credit card transactions by Brazilian consumers, more than two thirds use so-called “national cards.” Those cards only accept transactions using local currency – the Brazilian Real – and may only be processed through Brazilian banks.

For a retailer based elsewhere – the U.S., for example – the lack of a local payment solution in Brazil presents a problem as there is no way to process a credit card transaction for a consumer who has only a national card. That translates to lost business for retailers, even when consumers want to complete a transaction.

Fees and taxes

Even when consumers do have international cards, there are still hurdles to overcome. Of the roughly 30% of online transactions involving international cards, the issuing banks charge high foreign exchange transaction fees that discourage purchasing. Moreover, the Brazilian government levies the Imposto Sobre Operacoes Financeiras (IOF) tax, a 6.38% tax on cross-border transactions.

Local payments are crucial to success in Brazil

Every country is different, but the case of Brazil illustrates many of the issues retailers frequently have when they seek to globalize.

Given its high population, which has surpassed 210 million people, and its massive GDP, which has exceeded $2 trillion in recent years, Brazil represents a huge opportunity for growing merchants who hope to gain access to a burgeoning market. But without a local payment solution to overcome systemic barriers to doing business, retailers easily leave money on the table while failing to reach consumers who want to buy what they’re selling.

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